NITI Aayog launches second annual edition of “Fiscal Health Index”

**Executive Summary** NITI Aayog launched the second annual edition of the "Fiscal Health Index 2026" on March 11, 2026, in New Delhi. This index provides a data-driven assessment of Indian states' fiscal performance, aiming to guide reforms and promote evidence-based policymaking. The expanded scope now includes North-Eastern and Himalayan states, alongside the 18 major states evaluated in the first edition. **Key Points / Main Content** * **Purpose of the Fiscal Health Index:** * Provides a comprehensive and comparable assessment of the fiscal performance of Indian states. * Designed as a data-driven framework to evaluate fiscal soundness, guide reforms, and promote evidence-based fiscal policymaking. * Aims to ensure fiscal discipline, efficient resource allocation, and long-term macroeconomic stability by enabling benchmarking and identifying areas for improvement. * **Scope and Inclusivity of the Second Edition:** * Expands the framework from the first edition which assessed 18 major states. * Includes 10 North-Eastern and Himalayan states, making the Index more inclusive and representative of India's fiscal diversity. * Northeastern and Himalayan states have been evaluated and ranked separately from the major states due to structural differences. * **Key Findings and Observations:** * Analysis reveals significant variation in fiscal outcomes across states. * Among the 18 major states, most recorded moderated Fiscal Health Index (FHI) scores in 2023-24 compared to the previous year, reflecting evolving fiscal pressures. * North-Eastern and Himalayan states also exhibit wide variation in fiscal performance. * **Policy Priorities for Strengthening Fiscal Health:** * Enhancing revenue mobilisation and strengthening state own-tax capacity. * Rationalising committed expenditures to restore fiscal flexibility. * Improving the composition and quality of capital expenditure. * Adopting medium-term fiscal planning frameworks to manage deficits and debt trajectories effectively. * Strengthening public financial management systems. * Improving transparency through the use of verified fiscal data. * Monitoring off-budget borrowings more closely. * **Importance and Benefits of the Index:** * Strengthening fiscal governance at the state level is critical for maintaining macroeconomic stability and India's growth trajectory. * Systematic benchmarking tools like the Fiscal Health Index support states in identifying structural fiscal challenges and adopting targeted policy reforms. * Improving fiscal resilience across states is central to sustaining long-term development, reducing regional disparities, and supporting India's development aspirations. * Provides an important resource for policymakers, researchers, and stakeholders with transparent and data-driven assessment of state finances. **Impact Analysis** **State Governments** * **Impact:** * Will be assessed based on their fiscal performance against peers. * Will receive insights into their fiscal strengths and weaknesses. * Will be guided towards specific policy priorities for improvement. * Their fiscal trajectory is central to national fiscal sustainability. * **Action Required:** * Utilise the Index's insights and benchmarking framework to identify areas for fiscal improvement. * Adopt targeted policy reforms to strengthen fiscal health, enhance revenue mobilisation, rationalise expenditure, and improve fiscal management. **Policymakers** * **Impact:** * Will have access to a transparent and data-driven assessment of state finances. * Can make more informed fiscal decisions based on the analytical insights and benchmarking framework. * Can better understand the fiscal health of states to inform national policy. * **Action Required:** * Refer to the Fiscal Health Index for evidence-based policymaking and fiscal decision-making at the sub-national and national levels. **Researchers** * **Impact:** * Will have access to a comprehensive dataset and analytical framework for studying state fiscal performance. * Can utilise the Index to further research fiscal challenges and policy effectiveness in India. * **Action Required:** * Engage with the Fiscal Health Index for research purposes related to state finances and fiscal policy. **Stakeholders** * **Impact:** * Will gain transparency into the fiscal performance of Indian states. * Can understand the factors contributing to fiscal health and sustainability. * **Action Required:** * Use the information provided by the Index to inform their understanding and engagement with state-level fiscal matters.

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